DXwand raises $4M to scale its conversational AI platform serving enterprises in MENA

DXwand, a Cairo- and Dubai-based startup that leverages conversational AI to help businesses in the Middle East automate customer service and employee assistance, has raised $4 million in Series A funding.

UAE-based Shorooq Partners and Cairo-headquartered firm Algebra Ventures led the investment, with existing investor Dubai Future District Fund also participating. The Series A investment will assist DXwand in expanding further in the MENA region and accelerate its research and development efforts in generative AI, knowledge mining, and omnichannel conversational AI within the region.

Before founding DXwand, CEO Ahmed Mahmoud was employed at Microsoft, where he led their data and artificial intelligence enterprise sales in the Gulf region and the Middle East. His professional journey began with an engineering background and working on software and AI technology within development teams. Transitioning to the industry’s business side, Mahmoud worked at Vodafone and then Microsoft; in these roles, he engaged with clients to explore ways AI could enhance productivity and overall user experience.

At Microsoft, he identified something obvious: Conversational AI and broader AI technologies were not fully matured and developed in the Middle East, as solutions from Silicon Valley didn’t cater to Arabic or other languages in the region. “At that time, I tried to validate if we could build AI models for spoken dialects in the region, but we encountered some challenges. The realization of a business opportunity prompted me to resign from Microsoft and establish DXwand to address this gap.”

After going through an accelerator in 2018, Mahmoud launched DXwand to provide small businesses with a customer-centric chatbot tailored for sales over social media platforms. The firm initially secured seed funding of $150,000 from angels in Qatar and Egypt. However, the team soon realized it needed to switch business models to find product-market fit and become profitable.

“Our primary focus was building an AI solution that works for Arabic dialects, which are very complex and sophisticated — even Egypt had more than seven or eight spoken dialects. And that helped us to work well in this region, for the areas we support,” the Microsoft alum said in the interview. “Yet, this value by itself gets more sophistication wherever we go to more clients because those businesses require not just to have something to understand the language, but they also wanted something easier to onboard, and at that time, the natural language understanding solutions required a lot of efforts in labeling the data and working on labeling such data is a huge set of time and efforts that required businesses for us to do.”

In 2021, the Egypt-born AI startup embarked on a pivot, targeting corporates and enterprises instead of small businesses as it directed its efforts toward knowledge mining and retrieval augmented generation (RAG) domains. Back then, the buzz around large language models hadn’t yet taken off as they have now — and DXwand aimed to create a knowledge graph that eliminated the need for customers to label data manually. This approach allows it to pre-label data, facilitating faster onboarding of more clients and supporting sophisticated use cases, ultimately aiding enterprises in adoption.

Consider a scenario where an enterprise deals with a vast repository of policies and data, enough to fill a room with PDFs. The challenge arises when they aim to automate customer service or sales over their digital channels — a task that typically involves manually labeling all that data. Realistically, achieving this is no easy feat; many might find it impractical. This is where knowledge mining comes into play. With this capability, such enterprises can input their raw data — and DXwand’s system takes care of the labeling by creating a pre-labeled set and streamlining their processes to implement conversational experiences for their customers or staff without the painstaking task of manual data labeling.

In a nutshell, DXwand’s AI-powered software automates text and voice conversations between businesses, their customers, employees, and citizen-facing government services. This functionality spans various platforms, including call centers, Facebook Messenger, WhatsApp, SMS, and websites. The platform claims to comprehend slang in both Arabic and English, extracting valuable insights from conversations and presenting them on dashboards for businesses to make informed decisions. According to the startup, it provides analytical tools and dashboards that offer insights into these conversations and transform them into leads and sales, enhancing customer retention and acquisition.

To scale this model in the Middle East and Gulf regions, the startup took in additional investments between 2021 and 2022: $1.3 million in seed extension from SOSV and other investors and $1 million pre-Series A from the Dubai Future District Fund. This period coincided with the surge in interest and maturity of large language models. As these technologies became more robust, DXwand AI seized the opportunity to expand its offerings and cater to the rising demand for such solutions among its clients.

“We used those funds to support and accelerate our investments in knowledge mining, getting and leveraging specific solutions for specifically Arabic and other dialects. But also building on top of that knowledge mining to make it work for any language and expand the company into other areas like in Africa and Europe,” Mahmoud, who runs the startup alongside co-founder Mahmoud Gomaa, remarked. “Today, we have some clients from Africa. So we started to leverage that because it’s language agnostic, helps clients to onboard easily and solve their problems.”

The chief executive highlighted that the chatbot platform caters to over 40 clients across the MENA region, spanning diverse sectors such as healthcare, e-commerce, fintech, telecom, government, and legal. Since its inception, the AI startup has facilitated over 5 million conversations and currently stands as a profitable entity, Mahmoud added. Depending on usage volumes, clients are charged yearly subscriptions between $50,000 and $400,000. Furthermore, Mahmoud revealed that the company recorded over $5 million in annual recurring revenues in 2023, representing a 2x year-over-year growth and underscoring the platform’s increasing significance and adoption in a market where AI platforms are few and far between.

Armed with this new investment, DXwand’s subsequent plans include expanding across Africa and Saudi Arabia, Mahmoud shared on the call, adding that both regions hold particular importance in the startup’s strategy. He also notes that accelerating research efforts, specifically in knowledge mining and retrieval augmented generation, and forming alliances with technology providers like telecom operators to establish meaningful partnerships within the communities it serves remain top of mind for the startup, too.

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